A former senior Inland Revenue inspector warned this week that companies and their auditors are under more pressure than ever to get self-assessment right or face heavy penalties.
Under the new regime of Corporation Tax Self-Assessment, the Revenue will issue automatic penalties for dozens of mistakes it would previously have ignored, said Will Heard, director of tax investigation services at Levy Gee in Birmingham.
‘Companies will be forced to pay penalties if they have not got self-assessment correct,’ Heard explained. ‘The responsibility will fall to accountants to ensure they get it right and that their clients do make proper CTSA returns.’
Previously, Revenue policy was not to look in detail at large companies’ tax returns because they relied on companies’ audits. Of 128,000 reviews of company accounts in 1996/1997, more than 52,000 adjustments were made in the Revenue’s favour, netting an extra #17bn. Less than 1% of all companies currently face a Revenue investigation.
‘What has happened is that the Inland Revenue has allowed companies to be lulled into a false sense of security. They could easily have had penalties applied to them, and in future that is likely to be the case,’ said Heard.
‘Additionally,’ he continued, ‘under CTSA, the Revenue has a perfect right to select companies at random for a full review of their tax compliance.
For some companies, that is quite simply going to be devastating.’
A Revenue spokesman said it would exercise common sense over penalties.
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